Congress Allows Pension Cuts For Current Retirees

A provision in the recently passed spending bill will allow some underfunded multi-employer pension plans to cut benefits for current retirees.

“The move was the result of an alarm from the Pension Benefit Guaranty Corp. (PBGC) that multi-employer plans covering more than 1 million participants are substantially underfunded and, without legislative changes, will probably fail,” Washington Post business columnist Michelle Singletary wrote.

Under the law, “plans that estimate they won’t have enough money to pay 100 percent of benefits within 15 or 20 years can cut benefits,” but not for retirees who are 80 or older, or those who are on disability. Cuts would also be phased in gradually, so retirees between the ages of 75 and 79 would face smaller cuts than those under 75.

“Participants would have to be given the right to vote on cuts before the benefit reductions could be implemented,” claims the website Business Insurance, but “the U.S. Treasury Department could override the vote” if the plan in question is deemed “systemically important” to the health of the PBGC.

“Multi-employer plans are prevalent in industries like mining, manufacturing, and construction where workers often shift among employers,” The Wall Street Journal says, and while they allow workers to keep their pension benefits when changing jobs, they also require the support of multiple businesses.

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